Selecting and making an application for a credit card

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As exciting as it may sound, you need to be very careful when selecting and applying for a credit card. You are more flexible when you own a credit card but you should see to it that you settle the debt at the end of every month. Some of the aspects to consider include the following.

How is the Annual Percentage Rate (APR)?

The APR is a way of assessing the entire cost of the card. There is a law that governs the calculation of APR and there are some rules which apply. This helps you to compare cards but does not directly translate to how much it costs you.

The assumption is that the credit card is only used to pay for goods bought and does not consider any cash withdrawals, transfer of credit etc. There is also another assumption that you use up the whole credit limit on the first day and that you will make equal payments per month for one year without making any more purchases.

The APR terms must be in the credit card contract as well as the informational flyers so that you can run a comparison with other cards.

Be on the lookout a symbolic APR

There are some lenders who will calculate your APR based on your credit score. If your score is not so good, you will end up paying more in the interest that what has been advertised. It is important that you check with your lender how much you will pay based on your credit score.

How much are the fees?

The charges for late payments are not counted in the APR. It also does not include excess use of the credit card limit or payments that have been returned.

Compare offers of introduction

The lenders usually entice customers with offers with a fixed duration. Most of these offers include interest free purchase or debt transfers. When you make a purchase on the interest free offer, make sure you settle the payment before the offer period lapses.

What are the terms and conditions of offers on credit transfers?

Credit transfer is moving your debt from one lender to another who has better terms. Research on the duration of the introductory offer for the new card. There is usually a transfer fee and you need to put this in mind when considering the move.

Are you in need of the perks?

Some cards have very attractive benefits but you need to consider of you really need them since they cost some more cash. The benefits range from cashback, free travel insurance, air miles among many others.

Confirm your monthly payment

See to it that are able to make at least most of the debt in each month. The ideal situation however is making full payment each month.

Making the credit card application

You can apply for the credit card through filling out forms available at the lending bank. You can also do an online application through their website. You can make an appointment with someone in your bank to assist you with making the application, which is called in-branch.

Ensure that you receive pre-contract information and every detail is comprehensively explained to you including the risks of having a credit card.

How applying for credit cards affect you credit score?

Do not make an actual application during your window-shopping phase. This is to control the information that appears on your credit file.

Instead of applying, ask lenders to give you a quotation based on the information you give them or at the very least they should tell you if you are eligible.

Bettering your chances of successful application

Ensure that you are on the electoral register at your current residence. Close accounts that are not active and clear as much of your debt as possible.

In the event your card application is rejected

You should ask your lender why the application was rejected. If the rejection was after a CRA check, the lender is obligated to tell you which CRA was used and provide you with contacts for you to follow up.

You can use credit card builder in case your application was due to poor credit score. They can be quite costly so consider it carefully before settling for it.

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Watch My Wallet has everything you need to know about money, written by real people who’ve been there. Inspired by the philosophy of Early Retirement Extreme (ERE), our goal is to make informed decisions about our finances in order to achieve financial independence.

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Watch My Wallet has everything you need to know about money, written by real people who’ve been there. Inspired by the philosophy of Early Retirement Extreme (ERE), our goal is to make informed decisions about our finances in order to achieve financial independence.